Statutory scheme for rent increases in assured tenancies

The procedure must be followed in a statutory tenancy where the contract does not specify either: [1]

• a fixed amount or percentage by which the rent can be increased

• an amount or percentage fixed by factors not wholly within the control of the landlord, and that allows the tenant to ascertain how much the rent will be increased

For example, if the contract contains a provision for the rent to be increased in line with inflation, this remains in effect. The landlord can increase the rent by adhering to any conditions in the contract.

If the contract does not meet these conditions, and the tenancy is statutory, the statutory scheme must be used.

If the tenancy is contractual but the contract has no provision for rent increases, the landlord must serve a valid notice to quit in order to use the statutory rent increase scheme.

Section 24 of the Housing (Scotland) Act 1988 defines rent increase procedures:

• The landlord must serve a form AT2 notice on the tenant. [2]

• The notice must specify the proposed rent and the date when it will take effect.

• The date specified must be at least one month from the date of the service of the notice. If the term of the tenancy was for a period of less than six months then the amount of notice required is either equal to the term of the tenancy or one month, whichever is longer. If the term of the tenancy was originally for six months or more, then six months' notice is required before the new rent can take effect. [3]

• During the period of the notice and before the proposed new rent is due to take effect, the tenant and landlord can negotiate a different rent, or the tenant can refer the matter to the First-tier Tribunal.

• This procedure can only be used at 12-month intervals. A rent increase cannot take effect within 12 months of the date when a previous rent increase took effect, either by virtue of a previous application of this procedure, or by agreement between landlord and tenant.

If proper notice is not served, the First-tier Tribunal can issue a certificate of non-jurisdiction; the effect of this would require the process to start from the beginning.

Before challenging a rent increase its important to be aware that the tribunal can and sometimes do increase the rent, and that this can be higher than the rent currently being requested.  

Prior to a challenge it is important to try and judge what is likely to be considered to be the market rent for the property in question.  This can be done by researching current rentals for similar properties in the local area.  

In addition, previous rent decisions can be viewed on the tribunal website.  

The tenant can apply to the First-tier Tribunal using Form AT4 to determine the rent. This must be done before the date when the rent increase would take effect. [4]

Both the landlord and the tenant may be represented at the hearing. The tribunal should determine a market rent for the property. This is based on the rent that the landlord could reasonably expect to get on the open market for a similar property let out on an assured tenancy on the same terms. [5]

In doing so, the panel should disregard the fact that there is a tenant in the property; the value of any improvements carried out by the tenant, or alternatively, anything arising from the failure of the tenant to carry out their obligations under the tenancy.

The tribunal may also take into account any notice served on the tenant at the beginning of the tenancy informing the tenant of the possibility of future action under grounds 1-5 (the prior notice grounds). [6] These would limit a tenant's security and might therefore lead to the fixing of a lower rent. After considering these factors the First Tier Tribunal will determine the rent.

If a valid rent increase notice is served and tenant does not apply to the tribunal or reach an agreement with the landlord, the proposed rent increase will take effect.

From 1 April 2024 until 31 March 2025, there were temporary regulations for rent adjudication. [7]

While the regulations were in force, the tribunal could not set rents higher than a landlord's proposed increase. The permitted increase was calculated based on a taper formula, up to a maximum of 12%.

The temporary regulations have now expired. After 31 March 2025, when a tenant applies to the tribunal, the rent will be set at the open market rate. This can be higher than the landlord's proposed increase.

The new rent will be binding on the landlord and the tenant. The landlord will not be able to increase the rent again using this procedure for another 12 months. However, the landlord and the tenant could make an agreement to increase the rent before this time.

The rent that the tribunal determines will usually be payable from the date that was stated in the notice of increase, unless in the tribunal's opinion this would cause undue hardship to the tenant. The new start date cannot be later than the date of the tribunal's decision. [8]